In the fast-paced world of Florida real estate, a single contract error could derail a multi-million dollar project, or leave you empty-handed. To protect your investment or contract, you must strictly comply with the rules and regulations established under Florida Construction Lien Law, Chapter 713 of the Florida Statutes. For developers, the goal is to prevent a lien to be placed on their property and overpaying for contractor work; for contractors, it is ensuring their labor and materials are secured by the same property they are improving or constructing on. Understanding these statutory requirements will not only ensure legal compliance, but also your business’ wellbeing.
Developers: Shielding Your Investment from Liability
As a business owner or developer, your greatest risk is a ‘hidden lien.’ You might pay your general contractor in full, only to find out months later that a certain subcontractor was never paid—and they are now coming for your property.
- The Notice of Commencement “Insurance”: Your first line of defense should be a Notice of Commencement. By recording this notice with the Clerk of the Circuit Court of the county where the property being improved is located, prior to starting a remodelling or construction project, a clear start date for the project is set. This shields the filer from double payment and requires subcontractors to send mandatory Notices to Owner (NTO) regarding the work and materials utilized on the project.
- Don’t Pay Invoices Without an Affidavit: To avoid the trap of “double payments,” you should not issue a final check to your contract without a Final Contractor’s Affidavit. This document should specify all unpaid parties who performed labor, services, or provided materials to your property. Make sure this affidavit is provided by your contractor before you issue final payments for the project. Failure to acquire this document could expose you to paying hidden fees and costs to unpaid laborers, subcontractors, and other parties involved.
- The “Bond” Strategy Can Save You Time: Don’t allow a lien or payment dispute prevent you from selling or refinancing; you may be able to transfer the lien to a bond, which effectively clears title and allows your business to continue developing while the lien is dealt with as a separate legal matter. After a successful transfer, the lienor must still file a lawsuit to enforce the lien, but the suit is now against the bond rather than the property itself.
Contractors: Protecting Your Right to Get Paid
If you are a construction firm, a construction lien is your most powerful security and leverage. However, contractors still need to meet the strict requirements set forth under Florida’s Construction Lien Law, or suffer an uncollectible loss. There are no exceptions or grace periods to these rules; if you miss the following deadlines, your right to recover on the lien disappears.
- The 45-Day Countdown: To ensure proper payment, lienors must serve a notice on the owner including: the lienor’s name and address, a description sufficient for identification of the real property, and the nature of the services or materials furnished or to be furnished. A sub-subcontractor or a materialman to a subcontractor must serve a copy of the notice on the contractor as a prerequisite to perfecting the lien and recording a claim of lien. This notice must be served before commencing work, or no later than 45 days after commencing work, to furnish his or her labor, services, or materials. However, a contractor conducting his/her business directly with the owner does not need to serve a notice to the owner in order to protect the lien rights.
- Recording in Time and with Precision: Your Claim of Lien must be recorded within 90 days of your last day on the job, or the last day of furnishing materials, services, or meaningful labor.
- Consider “Leased Premises” Provisions: If a landlord of the property adds a provision to the lease that prohibits liens when a tenant makes improvements, a contractor must perform a thorough search for a recorded lease if their client is a tenant, rather than the owner, of the property.
- Be Aware of the “Notice of Contest”: An owner could force your hand by recording a Notice of Contest with the Clerk’s office, which cuts your time to file a lawsuit on the lien from one year down to just 60 days. It is important to be prepared and ready to litigate the moment you record your lien in case a Notice of Contest is filed.
Some Strategies for Business Stability
In the world of Florida construction cases, the most prepared party wins. Whether you are a developer or a contractor, the key to protecting your property, investment, or contract is to proactively manage foreseeable risks and expenses. Developers should track every project payment, unpaid party, and potential lien, whereas contractors should be aware of the deadlines to preserve and act on their lien rights–if need be.
At the end of the day, you know your business and its needs better than anyone else. But navigating the ins-and-outs of Florida Construction Lien Law requires more than just experience and industry knowledge—it requires a clear and robust legal approach. Reach out today for a professional advisory session tailored to your business needs.
